When it comes to saving for retirement, smart investors often choose Roth IRAs over traditional IRAs. That's according to a 2012 study from Texas Tech University, which revealed that people with high IQs were most likely to own a Roth IRA, regardless of their education, income or net worth.\r\n\r\nWhy are Roth IRAs (and 401ks, if your employer offers them) sometimes a smart choice?\r\n\r\nThey offer a unique benefit \u2013 your money is tax-free in retirement. You contribute to your Roth account with funds that you\u2019ve already paid income taxes on, and then you never have to think about taxes again.\r\n\r\nIn contrast, in traditional IRAs and 401ks, you pay no tax on your contributions (i.e., you take a \u201cdeduction\u201d in the year of the contribution) and then you don\u2019t pay tax until you withdraw the funds in retirement. \u00a0(Want to look at your existing retirement accounts while you read? Link them to your Personal Capital Dashboard to be able to view them all in one place).\u00a0\r\n\r\nExpecting a Higher Tax Rate in Retirement?\u00a0 It\u2019s the Main Reason to go Roth.\r\n\r\nBoth Roth and traditional IRAs have tax advantages.\u00a0 So why go Roth?\r\n\r\nFor many investors, the question to go Roth boils down to whether you expect your tax rate to increase in retirement.\u00a0 If you do, you have an arbitrage opportunity \u2013 all things equal, you grow more wealth by going Roth and paying your taxes now instead of later. (NB: If you do the math, you\u2019ll note that if your tax bracket does not change between now and retirement, there may be little difference in a Roth versus a traditional account. The main difference is paying your taxes now or later).\r\n\r\nSo how do you know if your tax bracket will change?\u00a0 Unfortunately, you don\u2019t.\u00a0 The government could increase or decrease taxes.\u00a0 Or, you could be making a lot more or less in retirement then you imagine.\r\n\r\nBut you can make some educated guesses: if you\u2019re early in your career, it\u2019s likely your taxes will be higher in retirement. \u00a0If you\u2019re closer to retirement and plan to live off a similar income, your tax rate may still be higher if some of your deductions \u2013 like interest payments for your mortgage \u2013 disappear.\r\n\r\nIs There Any Other Reason to Go Roth?\u00a0 Yes \u2013 More Flexibility.\r\n\r\nAnother key Roth feature is flexibility.\u00a0 Unlike a traditional retirement account, you can generally remove money from a Roth without penalty (be careful \u2013 there are exceptions to this rule, and you can only remove contributions, not earnings or growth).\r\n\r\nSecond, Roth IRAs are not subject to the same Required Minimum Distribution (\u201cRMD\u201d) rules as traditional requirement accounts. In plainspeak, once you hit 70 \u00bd, if your account has an RMD, you need to withdraw a specified minimum amount or face paying a 50% penalty.\u00a0 With Roth IRAs, on the other hand, you withdraw funds on your own schedule. It\u2019s only when you pass along your account to your heirs (tax-free!) that RMDs kick in.\r\n\r\nSo, Why Don\u2019t More People Go Roth?\r\n\r\nWhen you look at the figures, only about 17% of American households have a Roth IRA, compared to the 33% with a traditional IRA. For Roth 401ks, these figures are lower; less than 9% of people who with employer-sponsored Roth 401ks use it, according to a National Bureau of Economic Research (\u201cNBER\u201d) study.\r\n\r\nHere are a few potential reasons:\r\n\r\n\tRoths have limitations on eligibility.\u00a0 As shown in the chart below, Roth IRAs have income limits (NB: these limits don\u2019t exist for Roth 401ks)\r\n\tRoths are relatively new.\u00a0 Roth IRAs first came to be in 1997, and Roth 401ks have only been available since 2006.\r\n\tIndividual investors can fall victim to inertia. The NBER study referenced is great example of inertia among 401k participants in Roth decision-making.\r\n\r\n\r\nSo What Are Your Next Steps?\u00a0\r\n\r\nWe believe that the reason for the Texas Tech study finding that \u201csmart people\u201d choose Roths more is because asking more questions about your financial life will lead you to consider the Roth option (not because they\u2019re right for everyone!).\u00a0 Here\u2019s a list of questions that can help you lead a more examined financial life.\r\n\r\nFor your 401k plan:\r\n\r\n\tAre you currently participating in your employer\u2019s 401k?\u00a0 Refresh on the plan's details if you are \u2013 or start contributing if you aren't.\r\n\tDoes your company offer a \u201cmatch\u201d program? \u00a0Make sure your contributing enough to earn all the free money your employer is offering.\r\n\tIs the Roth option available?\u00a0 If so, it\u2019s time to think about whether a Roth makes sense.\r\n\tWhat are the investment options in your 401k?\u00a0 And when\u2019s the last time you brushed up on them?\u00a0 Try our Personal Capital Investment Checkup tool to see if those investments are right for you.\r\n\tHave you maxed out your 401k?\u00a0 If you\u2019re able to contribute more to your 401k, consider doing so.\u00a0 Because of the employer match, it\u2019s generally the most attractive for your savings.\u00a0 If you haven\u2019t maxed out your contributions this year, you may have until your tax return deadline to set up and make contributions for the previous tax year.\r\n\r\nFor your IRAs:\r\n\r\n\tDon\u2019t have an IRA yet?\u00a0 Time to consider your current and future tax situation to see whether Roth or IRA is right for you.\u00a0 If you have no idea, it might be worth consulting a tax professional.\u00a0 Or if you expect the brackets to be close, \u201ctax diversifying\u201d is a way to avoid guessing by putting some money in a Roth and some in a traditional.\r\n\tAre already in a traditional IRA?\u00a0 You might consider converting your traditional IRA to a Roth if you expect your income to rise or are concerned about tax rates increasing. However such conversions warrant some strategic planning since they can incur a hefty, one-time tax bill.\r\n\r\nHave further questions or want some professional advice?\u00a0 That\u2019s what your Personal Capital advisor is there for.\u00a0 For Personal Capital users, log into your account and select the Advisor or Investing tab to schedule an appointment to speak to an expert.